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Income Tax Appellate Tribunal, CHANDIGARH BENCH ‘B’, CHANDIGARH
Before: SHRI SANJAY GARG & SMT.ANNAPURNA GUPTA
आदेश/ORDER Per Annapurna Gupta, Accountant Member
The present appeal has been filed by the |Revenue against the order of the Commissioner of Income Tax (Appeals), Patiala (in short ‘CIT(A)’ dated 31.7.2014 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
2 . T h e s o l e i s s u e r e l a t e s t o a d d i t i o n m a d e o f s h a r e p r e m i u m r e c e i v e d b y t h e a s s e s s e e d u r i n g t h e y e a r a m o u n t i n g t o R s . 9 3 , 8 0 , 0 0 0 / - f r o m d i f f e r e n t p a r t i e s t r e a t i n g t h e s a m e a s u n e x p l a i n e d b y t h e A . O . a n d w h i c h a d d i t i o n w a s d e l e t e d b y t h e C I T ( A ) .
3 . B r i e f f a c t s r e l a t i n g t o t h e c a s e a r e t h a t d u r i n g a s s e s s m e n t p r o c e e d i n g s t h e A . O . n o t e d t h a t t h e
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a s s e s s e e h a d r e c e i v e d s h a r e p r e m i u m o f
R s . 9 3 , 8 0 , 0 0 0 / - f r o m n i n e p a r t i e s a s u n d e r :
Sr. No Name Address Amount paid 1 M/s Shalini Holdings Ltd. C-4/151, First Floor, Sector 560000/- 6, Rohini. 2 1120000/- M/s Nandal Finanace and C -33, 2nd Floor, Prashant Leasing Pvt. Ltd, Vihar, New Delhi. 3 M/s Aasheesh Royal Palace, G-55, Laxmi 1400000/- CapitaTj Services Pvt. Ltd, Nagar, Vikas Marg, New Delhi. 4 560000/- M/s Attractive Fin-lease 203, 18/12, WEA, Pusa ltd. Lane, Karol Bagh, Delhi- 5. 5 M/s Finage leasing 106, Patel Nagar, New 1400000/- and Finance (India)Ltd Delhi 6 840000/- M/s Sunny Cast & Forge 14A/33, WEA, Jetking Ltd. Building, Guru Nanak Market, Karol Bagh, New 7 1120000/- M/s Apporva Leasing Fin. 104, Single Storey, Ramesh and Investment Co. Ltd, Nagar, New Delhi. 8 980000/- M/s Avail Financial 555, Double Storey Market, Services Pvt. Ltd, New Rajinder nagar, New Delhi. 9 560000/- M/s Solomon Holdings Room No. 401, 3198/15, Pvt. Ltd, 4m Floor, Gali No.1, Sangatrashan, Paharganj, New Delhi. Total 93,80,000/-
The A.O. called for certain information from these
parties u/s 133(6) of the Act ,i.e PAN Number, proof of filing
return of income for the impugned year, computation of
income, copy of bank statement from where cheques were
issued and the source and mode of receipt of funds for
investing in the impugned share premium alongwith copy of
the relevant ledger account. In the case of four parties at
S.Nos.1, 2, 3 and 4, in the table above, the notices were
returned back undelivered since the parties could not be
traced/found at the said addresses. In case of three parties
at Sr.Nos.5, 6 and 7 of the table above, no reply was
received, while in the case of remaining two parties at
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Sr.Nos.8 and 9 of the table above, the A.O. noted that
incomplete information was provided which did not provide
sufficient evidences to prove the genuineness and
creditworthiness of the transaction and of the applicant. The
assessee was, therefore, asked to show cause as to why the
amounts of share premium be not disallowed interest he
absence of any corroborative evidence. The assessee sought
time for producing/confirming the transaction from the
parties. However the A.O. thereafter passed assessment
order making addition of the impugned share premium
treating the same as unexplained and ingenuine u/s 68 of
the Act.
The matter was carried in appeal before the Ld.CIT(A)
where the assessee contended that it had discharged its
onus of proving the genuineness of the impugned transaction
by filing necessary documents proving the identity, the
genuineness and the creditworthiness of the investors. The
Ld. counsel for assessee contended that it had filed copy of
the acknowledgement of return of income, copy of their
resolution to purchase shares, copy of their audited
statement of accounts and bank account statements. The Ld.
counsel for assessee further contended that the A.O. had
only disputed the share premium having accepted the
amount invested as share capital by the very same investors
and, therefore, it could not be said that the impugned
premium remained unexplained. The Ld. counsel for
assessee further collected the required information from the
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investors and submitted the same of the Ld.CIT(A) stating
that it had tried conducting the investors for submitting this
information during assessment proceedings but it took time
and cannot be furnished by the time the assessment was
completed. It was further contended that some of the letters
could not be served to the parties because there was change
in the correspondence address of the companies which the
said parties had explained and written their new addresses
in their information letters. The submissions of the assessee
were forwarded to the A.O. for his counter comments who
reiterated his contention made in the assessment order. The
Ld.CIT(A) after considering the contentions of both the
assessee and the A.O. held that the documents forwarded to
the A.O. had not been controverted by him and the said
documents showed that the investors company had sufficient
capitals and reserves that investment had been made
through bank accounts and copy of their income tax returns
had also been submitted. In view of the same, the Ld.CIT(A)
held that the identity, creditworthiness and genuineness of
the transaction was not in doubt. The Ld.CIT(A) further
stated that the A.O. had disallowed the investment merely
because the parties could not be produce. Thereafter
referring to various decisions of the Hon'ble High Court the
Ld.CIT(A) held that the assessee had fully discharged its
onus to prove the genuine of the transaction and
accordingly, deleted the addition made. The relevant finding
of the Ld.CIT(A) at para 6.3 of his order is as under:
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“6.3 I have considered the submissions made and also perused the assessment records. It is noted from the submissions & assessment record that the appellant during the course of assessment proceeding has duly submitted the copies of resolution of the Board of Company regarding allotment of shares, application from the respective subscriber companies for allotment of shares. The PAN No., copy of lTR with acknowledgement, list of Directors with addresses and Bank Statement of the subscriber companies were also filed. Further, the audited copies of the Balance sheet and P&L A/c and the acknowledgement regarding receipt of share certification were also filed. In case of Shalini Holdings Put. Ltd., the copy of assessment order passed u/s 143(3) for A.Y. 1993-94 was also filed. The appellant during the course of appellate proceedings has also submitted that the A.O. has accepted principle amount of investment in shares by these companies. The share premium has been paid by these companies against the principle investment in the shares. The share-holders are existing assessees and copies of the ITR have also been submitted. The payments have been made through account payee check and copy of bank statement were also submitted in support. The copy of the audited statement of accounts and bank account statements, the copies of resolution to purchase shares has been submitted. During the course of appellate proceedings, therefore, it is submitted that the identity of the persons is proved furnishing the acknowledgement of return of income, PAN No. of the persons. These companies are registered with the registrar of the companies. The genuineness of the transactions is proved by the providing the Bank Account statement of all these persons and the money has been received by Account Payee Cheques. The creditworthiness is also proved by the audited accounts of statement. It is further submitted that such details are not controverted by the A.O. The appellant further submitted that the appellant's company volunteered to do the needful to place the information sought u/s 133(6) on record and in case the information is not sent by the parties, it will try to produce the investor company. However, through the assessee company tried to contact the investor companies and the information was collected from that them it took time and the same could not be furnished on or before 25.03.2013 on which date the assessment was completed and the information collected thereafter, remained with the appellant. The appellant further relied on various case laws and submitted that no addition can be made u/s 68 in the case of the assessee company. It was also seen from the assessment record that the assessee vide letter dated 18.03.2013 submitted that the assessee can not be penalized for conduct of third parties over which it has no control. Further, vide order sheet entry dated 25.03.2013, it was submitted by the counsel of the appellant that it is not possible to produce these parties on 25.03.2013, as the concerned persons are out of station on account of long week and an occasion of Holi and Good Friday holidays. However, the A.O. completed the
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assessment on the same date. The appellant also submitted that there was a change of address in some cases and the new addresses were duly filed in the information letters now. All such documents were forward to A.O. which is not controverted. Further, as per details submitted, the shares capital of the investor companies and reserves and surplus are as under:-
M/s Vishal Paper Industries Pvt. LTd., Patiala
Assessment Year 2010-11 Details of Additions in Share Capital Account & Enclousers Thereof S.No. Name of the Share Share Capital Reserve & Holder of The Company Surplus 1. Aasheesh Capital I23.355.000.00 1,107,945.000.00 Services Pvt. Ltd. 2. Apoorva Leasing 199,749,000.00 998,865,500.00 Finance & Investment Company Ltd. 3. Solomon Holdings Pvt. 19,304,000.00 172,852,010.00 Ltd. 4. Avail Financial Services 16,330,000.00 82,630,000.00 Pvt. Ltd. 5. Nandal Finance And 122,583,000.00 1,068,778,734.62 Leasing Pvt. Ltd. 6. Attractive Finlease Ltd. 105,505,000.00 945,045,000.00
Shalini Holdings. Ltd. 127,480,000.00 1,121,250,000.00 8. Sunny Cast & Forge Ltd. 87,281,400.00 1,167,775,256.78 9. Finage Leasing & Finance 15,009,000.00 130,619,866.67 (India) Ltd. Therefore, looking into the entirety of the facts, it is evident that the investor companies had sufficient capital and reserve. The investments have been made through the Bank Accounts; the copy of IT returns filed has also been submitted, therefore, in all these cases, the identity, creditworthiness and genuineness of the transactions are not in doubt. It is submitted that the companies are registered with ROC. The A.O. has not controverted any of the documents filed by the appellant. The A.O. has simply disallowed the investment as the parties could not be produced before the A.O. In the case of CIT vs. Winstra Paper Chemiicals Pvt. Ltd. 330 ITR 603 (Del) the assessee has received share application money through the banking channels. The assessee company furnished written confirmation from the applicant companies, copies of certificates of corporations, PAN cards, PAN details and company's details of the applicant. The Hon'ble High Court held that under such circumstances, the finding of the tribunal that identity of the subscribers stood duly established from the documents produced by the assessee cannot be said to be perverse and there is no
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legal bar to more than one company being registered at the same address. Merely because the applicants did not respond to the notices sent to them, the A.O. was not justified in adding the amount of share application money to the income of the assessee. In the case of CIT vs. Dwarkadhish Investment (P)Ltd. 330 ITR 298 (Del) the assessee company received share application money. The Hon'ble High Court held that the initial burden of proof lies on the assessee yet once he proves the identity of the creditor/share applicant by either furnishing their PAN or Income tax assessment number and shows the genuineness of transactions by showing money in his books either by account payee cheques or by draft or by in other mode, these onus of proof would shift to the revenue. Just because the creditors/share applicants could not be found at the address given, it could not give the revenue the right the invoke section 68. Moreover it is a settled law that the assessee need not prove the "source of source." In this case the tribunal has confirmed the order of CIT (A) deleting impugned addition and held that the assessee has been able to prove the identity of share applicants and the share application money has been received by way of account payee cheqeus. In the case of Commissioner of Income Tax vs. Lovely Export (P.) Ltd. decided on nth January, 2008 by the Supreme Court of India reported in 216 CTR 195: It has been held as under:- "If share application money is received by assessee-company from alleged bogus shareholders, whose names are given to Assessing officer, then Department is free to proceed to reopen their individual assessments in accordance with law but these amount of share money can not be regarded as undisclosed income under section 68 of assessee company. (Special leave petition of the revenue is dismissed) " Thus, in this case, the appellant has duly discharged his onus. He has filed the copies of lTR of the companies, PAN etc establishing the identity of the subscriber. The transaction is through Bank and as per audited copies of Balance Sheet there is sufficient capital and Reserve with the subscriber. Moreover, as contended by the appellant, the share capital subscribed is duly accepted by the A.O. while share premium is disallowed. During the appellate proceeding the appellant again filed the confirmation which was also forwarded to the A.O. and are not rebutted. Relying on the ratio on decision in the case laws as above, in my opinion, the appellant cannot be punished for non-appearance of the subscriber once the appellant has submitted complete details establishing the identity and creditworthiness of the subscribers and genuineness of the transactions as held in the case of CIT vs, Lovely Export Pvt. Ltd. (SC) 216 CTR 195 and under such circumstances no addition can be made in the hands of the assessee company.
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Thus relying on the cases as above and submission made, the addition made by the A.O. is hereby deleted.” 6. Aggrieved by the same, the Revenue has come up in
appeal before us, raising the following grounds:
“1. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of. Rs.93,80,000/- made by the AO on account of share premium, ignoring the fact that the assessee had failed to discharge the onus of proving the identity and creditworthiness of the alleged shareholders & genuineness of the transactions to the satisfaction of the AO at the time of the assessment proceedings, since four companies could not be traced at their given addresses, three companies did not comply with the notice issued to them, the balance two companies submitted incomplete information and the assessee also could not produce the companies before the AO. 2. In the facts and circumstances of the case, the Ld. CIT(A) has erred in accepting assessee's version about genuineness of investors without giving an opportunity to the AO to call the companies so as to complete the inquiry he had initiated in respect of companies, especially since four companies were not found at their given addresses, three companies did not respond to the inquiry notice and the balance two companies furnished incomplete information. 3. In the facts and circumstances of the case, the Ld. CIT(A) has erred in relying on fresh information letters and changed addresses admittedly not supplied by assessee to the AO during the assessment proceedings, without admitting the fresh addresses and information letters as fresh evidence by following the procedure laid down under Rule 46A and without giving any opportunity to the AO to examine such evidence, only on the ground that the information forwarded to the AO remained uncontroverted, without appreciating the fact that without admission of fresh evidence by the Ld. CIT(A), the AO could not examine the same. 4. In the facts and circumstances of the case, Ld. CIT(A) has erred in relying on the decision of the Hon'ble Apex Court in the case of CIT Vs. Lovely Exports Pvt. Ltd., without appreciating that, as pointed out by the Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters and Finlease (P) Ltd., 342 ITR 169 (Del.), in that case the AO did not carry out any enquiry about the share applicants, whereas in the present case, the A.O. had tried to conduct enquiries in respect of all the nine companies but either the companies were not found or did not respond or they furnished incomplete
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information to him. 5. It is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored. 6. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.” 7. During the course of hearing before us he Ld. DR relied
upon the order of the A.O. while the Ld. counsel for assessee
relied upon the order of the Ld.CIT(A).
We have considered the rival contentions and also
carefully gone through the order of the Ld.CIT(A). We find no
reason to interfere in the same. The Ld.DR has not
controverted the factual findings of the Ld.CIT(A) that the
assessee had submitted necessary documents evidencing the
identity, the genuineness and the creditworthiness of the
investor companies during assessment proceedings, as
stated at para 6.3 of his order as under:
6.3 I have considered the submissions made and also perused the assessment records. It is noted from the submissions & assessment record that the appellant during the course of assessment proceeding has duly submitted the copies of resolution of the Board of Company regarding allotment of shares, application from the respective subscriber companies for allotment of shares. The PAN No., copy of lTR with acknowledgement, list of Directors with addresses and Bank Statement of the subscriber companies were also filed. Further, the audited copies of the Balance sheet and P&L A/c and the acknowledgement regarding receipt of share certification were also filed. In case of Shalini Holdings Put. Ltd., the copy of assessment order passed u/s 143(3) for A.Y. 1993-94 was also filed.
10 ITA No.829/Chd/2014 A.Y.2010-11
Therefore, the assessee had discharged the initial onus
cast upon him. Further ,we find that the CIT(A) has noted
that the information sought for by the A.O. by making his
own enquiry u/s 133(6) of the Act from the said investors
was also collected by the assessee from the said investors
and provided during appellate proceedings which was
confronted to the A.O. who did not find any infirmity in the
same. This fact has also remained uncontroverted before
us. Thus it stands that the concerned parties had also
independently confirmed the transactions. The CIT(A) ,we
find also took note of the financial position of the investor
companies and found that they had sufficient capital and
reserve to make the investment. Ld.DR has been unable to
controvert this fact also. The creditworthiness of the
investor companies thus stands sufficiently established.
Moreover the addition in the impugned case is only of the
share premium received, and we agree with the Ld.CIT(A)
that having accepted the share capital received from the
same investors, there was no reason to doubt the premium
thereon .
In view of the above, we have no hesitation in agreeing
with the Ld.CIT(A) that the genuineness of the transaction
stood established and we do not see any reason to doubt the
same. Even the Ld. DR has been unable to point out from the
order of the A.O. as to why the impugned transactions were
to be looked at with suspicion. The assessee had established
the genuineness of the transactions by filing relevant
11 ITA No.829/Chd/2014 A.Y.2010-11
documents and the same was confirmed by the investor
companies also, no infirmity in the documents filed either by
the assessee or by the investor companies has been pointed
out by the Revenue. We fail to understand, therefore, why
the impugned transaction should be treated as
unexplained/ingenuine. Also having established the
genuineness of the transaction with necessary documents,
as above, the onus shifted to the Department, and having
not pointed out any infirmity in the documents submitted by
the assessee, the assessee was not any more required to file
further evidences or even produce the directors of the
companies. We agree therefore with the Ld.CIT(A) that the
share premiums could not be said to be ingenuine merely
because the directors of the companies were not produced
for examination.
The Revenue, we find, has challenged the deletion of
the addition before us on the ground that the assessee did
not discharge its onus during assessment proceedings and
adequate opportunity was not given to the AO to complete
his inquiry vis a vis the investor companies and further that
the CIT(A) admitted the additional evidences without
following the procedure laid down in Rule 46A of the Income
Tax Rules,1962 for the same.
We do not find any merit in the above contentions of
the Revenue since as held above by us the assessee had duly
discharged its onus of proving the genuineness of the
transaction and the A.O. had been given sufficient
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opportunity to conduct all inquiries vis a vis the said investors in remand proceedings. Further we find that the CIT(A) had noted the fact that though the assessee had sought time to produce the investors, the AO without giving any further opportunity finalized the assessment. In this backdrop the CIT(A) admitted the evidences filed by the assessee collected from the investors and forwarded them to the AO for his comments. The CIT(A) therefore, we hold, had duly admitted the additional evidences in the circumstances enumerated in Rule 46A of the Rules, which allows the CIT(A) to admit such evidences where the assessee was not given sufficient opportunity to adduce the same earlier.
In view of the above, all the ground raised by the Revenue are dismissed.
1 3 . In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court.
Sd/- Sd/- संजय गग� अ�नपूणा� गु�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 29th March, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar
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